Retail giant Amazon might be gearing up to provide wealth management services, according to industry observers. And that could drive down investing costs to nothing at all.
It makes sense. Financial advice has become increasingly commoditized in order to reach out to even the smallest of investors. Now the company that pioneered online retail is inching toward financial services.
What is more, Walmart, Costco, and Target may not be far behind either. All could potentially offer wealth management services sooner than later.
Sears tried this back the 1980s (buying stockbroker Dean Witter and real estate firm Coldwell Banker), but that’s is no predictor of the future. Since then, technology has already created a level playing field.
Doug Fritz, founder and CEO of F2 Strategy, explains that while traditional investors may roll their eyes at the idea of Amazon offering financial and wealth management services, the business no longer really belongs to the banks.
When you remove the veneer, the two things that truly remain are trust and the ability to be present in the middle of a transaction. Amazon excels at both, Fritz says.
Amazon, and in fact, any retailer with a powerful digital e-commerce platform, robust physical presence, brand appeal and high trust built over years could potentially find an opening in the wealth management industry.
According to some analysts, Amazon and other retailers may find it difficult to join the wealth management bandwagon primarily due to regulatory challenges.
Others believe that Amazon’s natural play could come in the form of a giveaway to its dues-paying Prime members. For instance, Amazon might buy an existing “robo advisor” and makes its offering free to Prime members).
Yet some observers are skeptical. Even if Amazon were to introduce robo advisors, it would still face pertinent questions about experience. Robo advisors might not be able to, say, transition people into a smooth retirement.
Although Amazon can use its cloud-based platforms to duplicate financial services, wealth management often is more than mere money management.
It involves helping clients reach their financial goals. Pure robo advisors usually don’t offer that level of service.
Yet Amazon is forging ahead. Another report has the retailer teaming up with a major bank to create an Amazon checking account aimed at young consumers.
A few weeks ago, too, Amazon created a flutter when it announced that it was one of the key players in a joint venture along with JPMorgan Chase to reduce employer health plan costs and improve patient care.
Clearly, Amazon is moving in that direction, entering the world of banking, finance, and wealth management in some form or the other. That promises to force costs lower and could create some interesting new winners and losers along the way.